Most businesses, small and large, have value and Michigan divorce property law requires a fair division of all property acquired by reason of the marriage.
It does not matter if the business was started during the course of the marriage or merely increased in value during the course of the marriage for the value of a business to be subject to division in a divorce.
To understand how to value a business in divorce we will start with definitions of value of a business.
Fair Market Value
The first definition of value of a business is Fair Market Value (FMV). FMV is the value that a willing buyer and a willing seller will pay for the business. Simply put, the value of a business is what someone will pay for it. However, not every business in a divorce case can or should be sold.
The second definition of value of a business is Fair Value. Fair Value applies when there is a shareholder agreement which provides for a contracted buy-out of the shareholders interest. However, not every business has shareholders and a shareholder buy-out provision.
The third definition of value of a business is Investment Value. Investment Value is the value of the business as an investment. If the business pays a dividend, rent or other return on investment. The return of investment is the Investment Value. However, not every business has a return on investment.
Holder’s Interest Value
The fourth definition of value of a business is Holder’s Interest Value. Holder’s Interest Value is measures the amount of money the business makes as an investment to the current owner. This definition of value of a business presumes that the current owner of the business will continue to own the business.
In the next post, we will discuss the valuation methods for each definition of value of a business.
About Findling Law
I have been exclusively practicing divorce and family law in Michigan for over two decades. The attorneys at Findling Law all share the core value of practicing law to help people navigate change in their lives, without compromising principles. We specialize in high socio-economic, high-profile and high-conflict cases, while also working with clients of all backgrounds. We recognize that the most important aspect of the practice of law is the application of the law to your specific circumstances.
That is why we provide more free information on divorce and family law than any other Michigan law firm. We want to help you manage your situation. Allow our exceptional legal team to help you navigate the change in your life, without compromising principles.
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By: Daniel Findling